Running a business is a rollercoaster, and sometimes you find yourself staring down a mountain of debt. If you’re worried about keeping up with loan repayments and have stumbled upon the term “voluntary arrangement” at Companies House, don’t panic! It might be the solution you’ve been looking for.
Here at Blackstone Solicitors, we specialise in helping businesses across England and Wales navigate complex legal situations relating to CVAs. This article will explain what a voluntary arrangement (VA) means at Companies House and how it can potentially help your business recover.
Free Initial Telephone Discussion
For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of a CVA, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What is a Voluntary Arrangement?
A voluntary arrangement (VA), also known as a Company Voluntary Arrangement (CVA), is a formal agreement between a struggling company and its creditors (lenders, banks etc.) to restructure debt. It’s essentially a way to negotiate a more manageable repayment plan, giving your business some breathing room.
Think of it like this: you sit down with your creditors and propose a new way to pay off your debts. This proposal might involve:
- Extending the repayment period: Spreading out your repayments over a longer timeframe can significantly reduce your monthly payments.
- Reducing the overall debt amount: Negotiating a partial debt write-off can free up much-needed cash flow.
- A combination of both: The ideal scenario often involves a mix of extended repayment terms and some debt forgiveness.
How Does a Voluntary Arrangement Work?
The process of entering into a VA involves several steps:
- Proposal Development: With the help of an insolvency practitioner (someone who specialises in helping businesses in financial difficulty), you’ll develop a formal proposal for your creditors. This proposal outlines your current financial situation, the proposed repayment plan, and how you plan to turn things around.
- Creditor Meetings and Negotiations: Your insolvency practitioner will handle meetings with your creditors to discuss your proposal. This might involve negotiation and compromise to reach an agreement that works for both parties.
- Creditor Vote: Your creditors will then vote on your proposal. For the VA to be approved, typically more than 50% (by value) of your creditors need to vote in favour.
- Formalisation and Implementation: Once approved, the VA becomes a legally binding agreement. Blackstone Solicitors can ensure all legal aspects are handled efficiently.
Benefits of a Voluntary Arrangement
There are several compelling reasons to consider a voluntary arrangement if your business is facing financial difficulties:
- Improved Cash Flow: By reducing your debt burden or extending repayment terms, you free up crucial cash for day-to-day operations and potential growth opportunities.
- Enhanced Financial Stability: A successful VA creates a more sustainable debt profile, making your business less vulnerable to financial pressure.
- Avoided Insolvency: A VA can be a proactive measure to prevent a more drastic situation like liquidation (formal closure of your business).
- Preserved Business Operations: By keeping your business afloat, you protect jobs, maintain relationships with customers and suppliers, and give yourself a chance to turn things around.
- Less Publicity: Unlike formal insolvency procedures like administration, a VA is not normally advertised publicly. This can be beneficial for maintaining your business reputation.
Voluntary Arrangement vs. Liquidation: What’s the Difference?
While both voluntary arrangements and liquidation deal with debt, they have significant differences:
- Control: During a VA, you retain control of your business and continue operating. Liquidation involves an insolvency practitioner taking over your company to sell off assets and pay creditors.
- Outcome: A successful VA allows you to restructure your debt and potentially save your business. Liquidation results in the closure of your company.
- Publicity: VAs are not typically advertised publicly. Liquidation is a public process.
When Might a Voluntary Arrangement Be Right for My Business?
Here are some signs that a voluntary arrangement could be a good option for you:
- Struggling with Loan Payments: Are you constantly behind or scrambling to meet minimum payments? This is a major indicator of unsustainable debt levels.
- Cash Flow Squeeze: Is there constant pressure on your cash flow, making it difficult to cover operational costs and invest in growth?
- Declining Profitability: A consistent drop in profits can make it difficult to service your debt. A VA can provide breathing room to address profitability concerns.
- Negotiation Potential: If you believe your creditors are open to discussing a revised repayment plan, a VA could be a viable solution.
Final thoughts
A voluntary arrangement can be a complex process, but with the right guidance, it can be a successful one.
How we can help
We have a proven track record of helping clients deal with the legal process involved with a business looking to negotiate with its creditors. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
How to Contact Our Corporate Solicitors
It is important for you to be well informed about the issues and possible implications of creditor negotiations. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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